Net worth taxes are recurring taxes on an individual’s wealth, net of debt. The concept of a net worth tax is similar to a real estate tax. But instead of just taxing real estate, it covers all the wealth an individual owns. As today’s map shows, only three European countries levy a tax on net worth: Norway, Spain and Switzerland. France and Italy impose wealth taxes on selected assets, but not on an individual’s net worth per se.
Net wealth taxes
Norway levies a net wealth tax of 0.95% on personal wealth stocks exceeding NOK 1.7 million (EUR 140,000 or USD 160,000), with 0.7% for municipalities and 0.25% for the central government. Norway’s net wealth tax dates back to 1892. Additionally, for net worth above NOK 20 million (USD 1.87 million), the tax rate is 1.1 percent.
SpainNet wealth tax is a progressive tax ranging from 0.2% to 3.75% on wealth stocks above EUR 700,000 (USD 771,530; lower in some regions), with rates varying substantially between the autonomous regions of Spain (Madrid and Andalusia offer 100% relief). Spanish residents are subject to tax worldwide, while non-residents pay tax only on assets located in Spain.
In addition, the Spanish central government introduced a “solidarity wealth tax” ranging from 1.7% to 3.5% on people with net assets greater than EUR 3 million (USD 3.31 million) for 2022 and 2023. Under this new scheme, the central government collects any additional revenue from the solidarity tax after deducting the collection of the autonomous wealth tax. This wealth tax will affect not only taxpayers in Andalusia and Madrid, but all taxpayers residing in an autonomous community that has approved a higher tax exemption threshold or lower tax rates than those established by the central government.
Swiss levies its net wealth tax at the cantonal level and covers assets worldwide (except real estate and permanent establishments located abroad). Tax rates and allowances vary significantly between cantons. The Swiss net worth tax was first implemented in 1840.
Wealth taxes on selected assets
France it abolished its net worth tax in 2018 and replaced it that year with a property wealth tax. French tax residents whose net real estate assets worldwide are valued at EUR 1.3 million (USD 1.43 million) or more are subject to tax, as are non-French tax residents whose net real estate assets located in France are valued in EUR or more. 1.3 million. Depending on the net value of real estate assets, the tax rate goes up to 1.5 percent.
Italy it taxes financial assets held abroad without Italian intermediaries by individual resident taxpayers at 0.2 percent. In addition, real estate held abroad by Italian tax residents is taxed at 0.76 percent.
Since 2021, Belgium has had a solidarity tax or tax on securities accounts (TSA) of 0.15 percent on securities accounts with an average value of EUR 1 million (USD 1.1 million).
In it Netherlands, the value of net wealth (excluding primary residence and substantial business holdings) is included in income tax, with effective tax rates ranging from 0.56 percent to 1.78 percent. However, in 2021, the Dutch Supreme Court ruled that this system violates European law on property rights and non-discrimination. In 2022, an alternative system was proposed in which each category of assets (savings, debt and others) would have its own attributed return. 2022 was a transition year in which taxpayers had to choose under which system (the old system or the new proposal) they preferred to pay.
While estate taxes raise little revenue, a OECD report He argues that these taxes can also discourage entrepreneurship, hurting innovation and growth in the long run. In practice, the recent evolution of the wealth tax has pushed the regional governments of Spain to appeal the “solidarity wealth tax” before the Constitutional Court. In addition, Norway approved a higher exit tax as billionaires flee the country. Rather than reform and increase the wealth tax, perhaps lawmakers should consider whether the tax is serving its intended goals, and if not, consider repealing the tax entirely.